Mount Airy Casino Resort folds expansion plans

Matt AssadOf The Morning Call

Mount Airy Casino Resort has put the brakes on its plans for a $60.1 million expansion and is trying to restructure its $380 million in debt, its state-appointed trustee Anthony F. Ceddia told the Pennsylvania Gaming Control Board on Thursday.

The move halts the planned addition of 500 slot machines and 212 hotel rooms that was supposed to begin this year. It also has Ceddia looking to renegotiate the Monroe County resort's debt as its owner, Louis DeNaples, faces perjury charges.

Even as Ceddia gave his update, the board proposed new regulations that would allow it to more easily acquire the kind of FBI investigative files it never got before DeNaples was issued a gaming license.

''It's not financially feasible for Mount Airy to pursue [expansion],'' said Ceddia, the former Shippensburg University president appointed trustee after DeNaples was charged. ''It's clear that relief is necessary.''

DeNaples, a wealthy Scranton area businessman, was awarded a license for his $415 million casino in December 2006 while state police still were investigating whether he lied to gambling regulators about his ties to organized crime.

Dauphin County charged him in January with four counts of perjury, which set off a domino effect that started when the gaming board suspended his license, appointed Ceddia to take

control until the charges are resolved and ordered DeNaples to remove himself from all casino business.

Within days, Standard & Poor's lowered Mount Airy's junk bond status, saying DeNaples defaulted on his loans when his gaming license was suspended. The suspension triggered a ''technical default'' of loan terms. That's not a missed payment, but a breach of loan terms.

Ceddia outlined meetings he had this month with new Mount Airy Chief Executive Officer Joe D'Amato and creditors J.P. Morgan Chase and PNC Bank to restructure the resort's $380 million in debt.

He said that while the casino's revenues had fallen short of expectations since it opened in October 2007 in Paradise Township, they began to increase with a new marketing plan that brings in more tour bus traffic and with the arrival of better weather.

The restructuring is needed not only because Mount Airy's creditors claim it is in technical default, but because it has suspended the $60 million expansion that was ready to start. The expansion money was part of the $380 million debt package, and resort officials would like the debt reduced, said Mount Airy spokesman Pete Peterson.

A $25 million line of credit in the debt deal remains open to Mount Airy for expenses, but Peterson said J.P. Morgan Chase must now approve the use before the money is released.

Peterson said the resort remains financially secure.

''Mount Airy has decided to reassess its funding priorities,'' Peterson said. ''This doesn't mean expansion will never happen. It just means it won't happen now.''

The gaming board did a little restructuring of its own Thursday, proposing new regulations. One would require license applicants to file a Freedom of Information Act request for any law enforcement investigative files so those files can be turned over to the gaming board's Bureau of Investigation and Enforcement.

DeNaples had done that with FBI files on him, but did not turn them over to the board before he was charged with perjury. DeNaples has said he is innocent.

The board is scheduled to vote on the provision next month. It also is drafting a regulation that would give it the power to name a trustee to take over a casino to preserve its viability. Though the board did that with Ceddia, it wants the option in writing.

The board wants a regulation to keep gaming hearings for license applicants open to the public. Though applicants would have the right to request the hearings be closed for certain issues, the board does not want the hearings to be automatically closed the way they were in fall 2006.

And the changes would not stop there.

''We will also discuss giving the board the power to issue investigative subpoenas and the power to compel testimony in exchange for limited immunity,'' said gaming board Chairwoman Mary DiGiacomo Colins.

Colins said the board will work closely with a bipartisan gaming task force appointed by state Sen. Jane Earll, R-Erie. But despite the proposed changes, Colins stopped well short of saying the board erred in investigating DeNaples.

''Not only has the board done a complete and thorough job in the past, but it is our intention to do an even better job in the future,'' she said.